The announcement on exemption in the Union Budget presented by finance minister Arun Jaitley on Wednesday has boosted morale of farmers, who have been eagerly awaiting distribution of their share of land.Sribala Vadlapatla | TNN | February 02, 2017, 11:00 IST

HYDERABAD: Exemption of capital gains tax for about 28,000 farmers, who gave up their land for construction of the AP capital city of Amaravati, will boost the sagging real estate sector in Krishna and Guntur districts. The announcement on exemption in the Union Budget presented by finance minister Arun Jaitley on Wednesday has also boosted morale of farmers, who have been eagerly awaiting distribution of their share of land.

The land pooling scheme is the biggest such exercise in India. Incidentally, this is the first time the Centre has announced exemption in capital gains tax for such a large number of farmers. Though the move will rob considerable quantum of revenue to the exchequer, real estate dealers feel the exemption will pave way for similar land pooling exercise for public purpose projects all over the country. Politically, the move will benefit the ruling TDP-BJP combine in Andhra Pradesh. The AP government poo led about 33,000 acres of land in 29 villages spread over three mandals abutting the river Krishna in Guntur district. Except for a few legal hurdles, the exercise was accomplished successfully by the cash-strapped government. Had the land pooling scheme not implemented, the government would have coughed up about Rs 1,65,000 crore towards land acquisition and related cost.

Since the government had gained from the scheme, it wanted to pass on the benefit to all farmers who responded to the land pooling exercise.In fact, chief minister N Chandrababu Naidu had ap pealed to the Centre several times to provide relief in capital gains tax to farmers. Jaitley, who was in the upco ming capital city in October last year, had indicated the Centre would consider the demand for waiver of capital gains tax.

Wednesday's announcement has given the much-needed shot in the arm for the Andhra Pradesh government and the AP Capital Region Development Authority (CRDA). The exemption is applicable only to farmers who were holding land at the time of bifurcation of the state on June 2, 2014, and only if they participated in the land pooling scheme. Capital gains tax is a tax on profits earned on sale of an asset that was purchased at an amount lower than the money realized on sale. Had the Centre not granted exemption, Amaravati farmers would have paid huge taxes as the value of their land parcels had risen. The exemption will benefit farmers who will stand to benefit by at least Rs 30 lakh.The state government agreed to return a minimum of 1000 sq yards of residential and 250 sq yards of commercial land per acre of land pooled.

Exemption will last till 2020. Farmers selling their share of land will be exempted from the tax for the first sale.